Find Financial Balance with a Budget

Creating a budget will put your finances in black and white, giving you a plain view of your biggest expenses and areas of opportunities to save for the things you really want.

Striking a financial balance will give you piece of mind, especially in a troubling economy as you can choose to be savings-heavy now and spend more freely as the economy recovers.

Calculate Income vs Expenses

Firstly, list all of your monthly income. Sources of income received annually should be simply divided by 12. This figure will set the cap on your total budget.

Secondly, list of all your monthly expenses. If there’s an expense that does not occur every month, assume that it does so that your budget can be made to standard for the entire year. Be sure to include such expenses as; housing, food, transportation, utilities, entertainment, etc. Track your spending for a full month during this stage of budgetary planning. Save your receipts and each evening write down your expenses for the day. This is the best way to gain an accurate reflection of actual expenses.

Determine if your income covers all of your current expenses. If the answer is no, then expenses need to be reduced.

Save money by adjusting expenses

Adjust expenses. Depending on the amount of the shortfall, it may be a simple matter of reducing some discretionary spending, such as entertainment, or eating out. If the deficit is larger, understand that a lifestyle change may be needed; a smaller apartment, public transport instead of a vehicle you can’t afford.

If your income covers all of your expenses consider cutting some expenses to put more in your savings. This can help free up extra money for a variety of reasons; education, a vacation or should the unthinkable happen, sudden unemployment.

Add new categories if necessary. Three areas that are often overlooked are 1) debt reduction 2) retirement savings and 3) emergency savings. An emergency fund will help you avoid unnecessary debt in those unforseen money pitfalls; car troubles, illness etc.